> For the complete documentation index, see [llms.txt](https://docs.tydro.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.tydro.com/developers/smart-contracts/interest-rate-strategy.md).

# Interest Rate Strategy

This contract implements the calculation of interest rates based on the state of each reserve. The model follows a **two-slope structure**:

* One slope applies when utilisation is below the `OPTIMAL_USAGE_RATIO`.
* A steeper slope applies once utilisation rises above the optimal point, up to 100%.

Each Tydro market deploys its own instance of the interest rate strategy contract, as it caches the [`PoolAddressesProvider`](/developers/smart-contracts/pool-addresses-provider.md) and cannot be shared across markets

The source code is available on [<mark style="color:blue;">GitHub</mark>](https://github.com/aave-dao/aave-v3-origin/blob/main/src/contracts/misc/DefaultReserveInterestRateStrategyV2.sol).

### View Methods

#### getVariableRateSlope1

```
function getVariableRateSlope1(address reserve) external view returns (uint256)
```

Returns the variable rate slope below the optimal usage ratio for the specified reserve. This is the variable rate when the usage ratio is between 0 and OPTIMAL\_USAGE\_RATIO.

**Input Parameters:**

| Name    | Type    | Description                |
| ------- | ------- | -------------------------- |
| reserve | address | The address of the reserve |

**Return Values:**

| Type    | Description             |
| ------- | ----------------------- |
| uint256 | The variable rate slope |

#### getVariableRateSlope2

```
function getVariableRateSlope2(address reserve) external view returns (uint256)
```

Returns the variable rate slope above the optimal usage ratio for the specified reserve. This is the variable rate when the usage ratio is greater than OPTIMAL\_USAGE\_RATIO.

**Input Parameters:**

| Name    | Type    | Description                |
| ------- | ------- | -------------------------- |
| reserve | address | The address of the reserve |

**Return Values:**

| Type    | Description             |
| ------- | ----------------------- |
| uint256 | The variable rate slope |

#### getBaseVariableBorrowRate

```
function getBaseVariableBorrowRate(address reserve) external view override returns (uint256)
```

Returns the base variable borrow rate for the specified reserve.

**Input Parameters:**

| Name    | Type    | Description                |
| ------- | ------- | -------------------------- |
| reserve | address | The address of the reserve |

**Return Values:**

| Type    | Description                                     |
| ------- | ----------------------------------------------- |
| uint256 | The base variable borrow rate, expressed in ray |

#### getMaxVariableBorrowRate

```
function getMaxVariableBorrowRate(address reserve) external view override returns (uint256)
```

Returns the maximum variable borrow rate for the specified reserve.

**Input Parameters:**

| Name    | Type    | Description                |
| ------- | ------- | -------------------------- |
| reserve | address | The address of the reserve |

**Return Values:**

| Type    | Description                                        |
| ------- | -------------------------------------------------- |
| uint256 | The maximum variable borrow rate, expressed in ray |

#### calculateInterestRates

```
function calculateInterestRates(    DataTypes.CalculateInterestRatesParams memory params) external view override returns (uint256, uint256)
```

Calculates the interest rates depending on the reserve's state and configurations. This function returns only two values: the liquidity rate and the variable borrow rate.

**Input Parameters:**

| Name   | Type                                   | Description                                       |
| ------ | -------------------------------------- | ------------------------------------------------- |
| params | DataTypes.CalculateInterestRatesParams | The parameters needed to calculate interest rates |

The DataTypes.CalculateInterestRatesParams struct is composed of the following fields:

| Name                     | Type    | Description                                                                 |
| ------------------------ | ------- | --------------------------------------------------------------------------- |
| unbacked                 | uint256 | The amount of unbacked tokens                                               |
| liquidityAdded           | uint256 | The liquidity added during the operation                                    |
| liquidityTaken           | uint256 | The liquidity taken during the operation                                    |
| totalDebt                | uint256 | The total borrowed from the reserve                                         |
| reserveFactor            | uint256 | The reserve portion of the interest that goes to the treasury of the market |
| reserve                  | address | The address of the reserve                                                  |
| usingVirtualBalance      | bool    | Flag to indicate if the virtual balance is being used                       |
| virtualUnderlyingBalance | uint256 | The virtual balance of underlying asset used for mintable assets            |

**Return Values:**

| Name               | Type    | Description                                |
| ------------------ | ------- | ------------------------------------------ |
| liquidityRate      | uint256 | The liquidity rate, expressed in ray       |
| variableBorrowRate | uint256 | The variable borrow rate, expressed in ray |


---

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